Big 4

Are Big 4 Firms Getting Stingy?

The benefits to working for a Big 4 firm can be embarrassing sometimes. It's just not things like weeks of PTO that you'll never use or pet insurance, but also the day-to-day perks that come along with carrying the water for a behemoth professional services firm. Fancy phones, corporate cards with generous rewards, discounts on pretty much everything, tons of SWAG etc. etc. It's fun for awhile, but the luster fades pretty quickly and then you start taking these things for granted, as humans are wont to do.

For example, when I started at KPMG many moons ago, I remember the firm matched our 401(k) contributions dollar for dollar. It was a great perk! Very generous. And then a few years later when it appeared that the economy was headed for a fiery crash landing, the firm cut the match to 25 cents1 for every dollar contributed and people were mad. Really mad. The thing is, a 25% match is still pretty good! Nevertheless, it was a sign that the firm was reining in some of its spending. Funny thing, not long after the firm cut the match, they really started getting cost-conscious and me and a few hundred of my closest colleagues were let go. Ahh, those were good times.

I only mention it now because we've received a few interesting anonymous tips over the last week or so. For starters, a couple of messages about penny pinching at EY. Here's one we received last week:

EY is pulling platinum AMEX privileges for people who travel more than 100 nights a year, they are also upping the minimum to 120 nights for any benefits.

And another from earlier today:

EY just lowered their telecommunications/mobile plan reimbursement to $60 per month for all levels citing that they have "researched this" and it seems reasonable.

Now this might be nothing, but it's worth remembering that EY had a disappointing year. I mean, it was fine, all their business lines grew (except for assurance), but Mark Weinberger cited "The continuing global economic slowdown," according to the Wall Street Journal as a culprit in the slower growth. Even PwC felt the pain in its business this year. Bob Moritz told the Journal that "economic uncertainty and efforts by the firm’s clients to hold down their expenses" were a factor. It's not much of a stretch to wonder if that means PwC will be cutting expenses, too.

The other rumor we've heard is that KPMG, whose fiscal year wrapped on September 30th, had a very disappointing year. The firm usually doesn't report its revenue results until December, so we'll refrain on commenting until we hear something more definitive, but layoff rumors are floating around. Again, nothing definitive at this point.

More broadly, we'd be interested to hear if the rumors of EY go beyond just AMEX privileges and mobile reimbursements. Are Big 4 firms cutting costs elsewhere? Are your teams being told to keep the expenses in check? Discuss in the comments and email us if you have more information.

1That's to the best of my recollection, folks. If someone from the late 2000s remembers it better, corret me over email.

Back during the “great recession”, my Big 4 firm did the following. True story.

They announced that unlike all the other firms, they were not going to do layoffs. They just weren’t gonna do it, because it was the right thing to do. They even had marketing communications and top executives doing interviews in order to get their much deserved pat on the back. The only catch, as it was announced to the staff, would be that there would be a pay freeze for all employees that year.

Some of the high performing staff (i.e. douchebags) were upset about this, believing it was unfair to them. But most people throughout the firm applauded this new approach to doing business, and were just fine with sacrificing their own pay in order for everyone to have job security. We were one big happy firm, and we were going to weather this economic storm TOGETHER!

Of course, when annual assessment time came around a few months later, the firm was suddenly much more strict about its ratings, and many more staff received the lowest ranking than the year before. These staff would, of course, need to be “counseled out” because they just weren’t cutting it. When someone would question this and call it “layoffs”, there would be a swift response from management that it was not layoffs, but rather just the normal annual assessment process that the firm does every year.

And that, my friends, is what true leadership looks like at a Big 4 accounting firm.

inertiatic_esp

I’ve heard about this and regrettably think it made sense. Thing is, if headcount is steady and the firm wants to maintain an inflow of new hires, there’s really no other way. Normally you kinda need some ‘A’ players, ‘B’ players, and ‘C’ players for things to work smoothly . . . but temporarily cutting into the ‘C’ ranks isn’t too damaging.

Other firms cut down way more on campus hiring and now are hurting because their potential manager pool is too small.

Anyway, there is definitely a level of stress across the Big 4 right now. Weak economic growth isn’t meshing well with aggressive firm growth plans, particularly in the advisory space.

Big4Veteran

The economy isn’t weak. Don’t buy the bullshit. The worry isn’t that the firm is losing money or on the verge of going out of business. The worry is that the firm isn’t making as much money as the partners want to be making.

There’s a difference between taking drastic measures to save the company, and taking drastic measures to make sure the partners achieve their profitability goals.

The economy isn’t weak right now, especially for large accounting firms.

inertiatic_esp

Well, the whole pyramid scheme kinda falls apart if partners don’t make enough money. All the sweet talk and ‘1’ ratings in the world go for naught unless there’s a pot of gold on the other side.

Andrew Y

I agree, but it seems as if there is a lot of concern amongst the firms that things could change in the near future. When revenue growth slows and firms have over hired, then this is what happens. It is prudent management to get in front of it.

There is never a good time to shed professionals, but if they are correct and growth will tail off then it is actually better to do things now so that people can get out to the job market before it gets flooded.

cpanum31

The labor force utilization rate is under 65%.

Out of curiosity, what are you defining as a weak economy these days?

Corporate Liaison

Big4Veteran is right. Its all about PPI

The Horniest Partner

I think this was common (not the no layoffs part) during the recession. My own firm had a directive to the partners and sr. mgrs. to give more candid feedback (we tend to be too nice at times) and identify any low performers so they can be terminated.

keepin_it_real

The best was when the partners were forced to layoff their own. Some partners took it as early retirement and gladly took the money to gtfo. Others didn’t take it so well and let the whole office know about it. Good times back in 2008 and 2009.

Big4Veteran

If the firm would’ve just done layoffs, I wouldn’t have had a problem with it. It’s what all the other firms were doing, and it would’ve been standard operating procedure for an economic downturn. It would’ve hurt morale in the short run, but life would go on.

My problem was the firm made a big PR scene about being different from all the other companies out there. My firm was loyal to its employees, and everyone would sacrifice and ride out the economic storm together. The firm ended up getting some pretty good publicity for this too.

So it was infuriating when they went ahead an did layoffs a few months later anyway, and denied that they were layoffs by calling it “counseling out” low performers. It also bugged the shit out of me that my own firm had so little respect for my intelligence that they thought I’d believe their bullshit.

Layoffs are about greed. But my firm compounded the greed by lying to its employees and the public, and even trying to get a pat on the back from the public for their lying.

AaronBalake

So accurate it hurts.

Had a similar situation, I was part of a practice that was largely under performing and had a plethora of staff that spent copious amounts of time sitting on the bench (myself included). No need to fear, the partner of the practice made up for the loss in revenue by cutting out employees who didn’t necessarily fit the criteria to be cut from the firm. By criteria, I mean, their performance reviews were fine, but the partner needed to make up for lost revenue somewhere.

Overall, Big 4 firms are a PARTNERSHIP ran by (mostly) greedy Partners who want their cut at the end of the year. An unfortunate truth.

When you use the word ‘counsel’ we all know who your alma mater was! None of this surprises me as Accountants are the worst when it comes to cold hard cash!

Corporate Liaison

Deceit wrapped up in a program called “The Next Level” very accurate depiction of how the wont call it a layoff and still cut staff 20% But their VC of HR who reached mandatory retirement age and who engineered the acquisition of his former firm jumps into a lucrative consulting role within that very practice . A stacked deck

Elcontable

Nice conclusion

Yuckountant

You forgot to mention that PwC just announced that they’re not paying December and April bonuses and putting them to September.

Which means a bonus we would receive in 6 weeks is now coming 1 year from now and one in 6 months 1 year from now.

They’ve essentially pushed payments back so they are avoiding paying bonuses to people that leave within the next 11 months + in effect are making the April 2016-October 2016 bonus never paid, since anyone joining the firm now is eligible for the exact same bonus as those who have been here for the last 6 months.

Then they tried to sell it as “less admin work for management and more efficient.”

Only a big 4 would tell their staff they’re no longer getting bonuses 6 weeks before they paid them for the last 6 months because management didn’t want to do the admin work.

iamthelolrus

Yep. Many people are very unhappy about this, including myself.

AaronBalake

LOL, being an ex PwC employee, this does not surprise me in the slightest.

Tyler Durden

They’ll reverse the policy when next August comes around.

Basis Adjustment

I know that the big4 publish revenue numbers but I don’t believe I have ever seen any metrics that express profitability. Maybe my head has been so deep in the sand that I somehow missed this gem? I guess revenue is the only data needed for the dick measuring contest anyway. Each year I see the firms publish increases in revenue but profitability is left for the imagination. I think the Cubs will win the world series before firms publish performance information more substantial than revenue figures.

keepin_it_real

The UK big 4 firms publish profitability and net profit per partner. Best dick measuring contest for the big 4 firm there is with audited (even though we all know audits are a joke) figures.

Basis Adjustment

gave this a google search. the comment section to the FT article was not as good as I expected 🙁

SmallFry

this is definitely one of the better articles- thanks Caleb

The Horniest Partner

I wish I would have saved my benefits package for my first job. It was hand written on legal pad paper. It was an absolute joke but I needed a job. The managing partner was probably the cheapest SOB this side of the Mississippi. Starting pay back then was 27-ish for college grads. He told me salary was mid-20s in the interview. OK – that’s not too off what others are getting. Verbal offer was “around $23ish”. I got the handwritten offer of $22-something. Oh well I got the hell out of there after I passed cpa.

Chris

Don’t mean to age you, but what was that salary adjusted for inflation?

The Horniest Partner

Based on the calculator I used (1995 to 2016) it came out to be $36K – pitiful. Oh well, it was a shit firm but I needed a job. It was much tougher for college grads in the early to mid 90s. My grades were average. I actually got a DUI the night before the interview with this firm. I was a hot mess.

AaronBalake

Opinion:

Big 4 firms have become stingy because the current economy and job market allows for it. I think things are better now, however, lets go back in time a few years, unemployment is high, job opportunities are low, and at this point, it is common knowledge that having a Big 4 firm on your resume is a door opener for future job opportunities.

Guess what, Big 4 firms know that having them on your resume is the golden star which proves (more often than not) that you are at the minimum, competent.

With that said and taking all things previously mentioned into account, why the fuck would Big 4 firms throw money our way when they (the firms) know so many people are practically desperate to work for them JUST to have them on their resume?! Big 4 firms are understanding of the value there is in merely having them listed on your resume, and people, for the most part, are more excited to say they work at a Big 4 firm rather than bitching about low offers. That is why (I think) you really only see existing / long time employees bitching / realizing how bad they are getting fucked monetarily. Seasoned employees have the experience and knowledge to see through the bullshit because they’re no longer drunk off the Kool-aid .

Andrew Y

I would say that in our unnamed practice of about 1,500 raises and bonuses were exceptional this year on average. There were naturally some people who felt they deserved more, but for the most part the feedback was very positive. It is a competitive market and you have to pay your top and next tier people well or else they will get taken by industry of the competition. Now for the average performers, or those deemed to be just meeting expectations, I concur that firms do not over invest in those people.

AaronBalake

Unless you are the approving partner for the 1,500 people in your unnamed practice, I can’t take your comment seriously, since you obviously don’t have insight into what the raises and bonuses for all 1,500 people in your unnamed practice were.

Andrew Y

Do I have the data for each person? No I do not. I wouldn’t have posted if I didn’t feel comfortable with the information. I know what the raise pool was as well as total bonus percentages. Things were good this year. Complaints were very low, and yes, we do get some, but in comparison to years when things were less robust, they were statistically immaterial.

I honestly do not care whether you take my comment seriously. I absolutely expected you to reply like that. You have your view and no one on the internet is going to change that. I’m just offering up a different view from someone on the inside.

Corporate Liaison

The radio station has upped its 401K match to 75 cents on the dollar. Only a matter of time before it slides back down to 25 or 50

Anonyaudit

I was recently informed by my Big 4 firm that the expectation was that we maintain busy season hours year-round. I work in a specialty line that touted work-life balance in comparison to traditional audit. That’s just the way she goes.

Tad Taxation

Unfortunately, work-life balance in Big 4 can vary wildly among offices in the same firm and even groups within the same office. It’s all luck of the draw.

Why Can’t I Post as a Guest?

My B4 firm took away our phones, is cracking down on expense reports, had layoffs, and is downsizing office space. I think the office of the future is going to be 8 people sitting at a lunch an elementary school lunch bench working on ipads. This is all a result of the firm trying to reduce expenses to offset the cost of historically low turnover (generally a good thing, but not in Big4 model). At this point, the partner & director salaries, benefits, flexibility, and time off are incredibly favorable compared to similar positions in industry. No one is leaving because they see their clients get abused and underpaid as bad as they do at the Big 4 but without big payoff as a partner or director.

If the firms want people to leave voluntarily, they need their client’s to offer real work life fit & significant pay increases at lower levels. 15% pay bumps aren’t going to cut it when the reality is that industry sticks you at 3% raises and you can get 10% every year if you are a top performer at Big4. They aren’t going to convince their client’s to spend more on internal departments vs outsourcing, so it turns into a vicious cycle.

Scharfinator

Agree that industry raises aren’t nearly as big as as Big 4 ones – IF you fail to move up in your company. Promotions, new opportunities, promotion through new employment, all that stuff is out there.

willie phuister

at deloitte the consulting firm (the audit revenues are only about 10% of the total) it still seems to be the wild west. they now give people 16 weeks paid leave for maternity or paternity leave.